Council takes up property tax cuts

Proposals include one-time rebates and raising exemptions

The City Council, hearing cries from property owners facing ever-rising tax bills, is proposing increasing homeowner exemptions, reducing tax rates and granting one-time rebates.

"You cannot escape the fact that real property taxes have just gone berserk," said Councilman Charles Djou. "They have really skyrocketed. We've got to provide some relief to people."

But competing needs will likely mean that the financial pot to lessen the tax burden might not be as big as taxpayers would like. These needs include anticipated public employee union pay raises and new voter-mandated funds for land conservation and affordable housing.

"I'm just a little bit disheartened to think that we won't be able to give the kind of tax break to people that we would otherwise," Council Chairwoman Barbara Marshall said.

A special Budget Committee meeting is scheduled for 9 a.m. tomorrow to take up 11 of the property tax proposals introduced.

"We'll put them all out there, take testimony on them and start working on whittling them down into what will be a (property tax) package that we can seriously move forward working on," said Council Budget Chairman Todd Apo.

Apo said the package of legislation that is ultimately approved needs to do several things:

» Help homeowners who occupy their houses.

» Assist needy homeowners who make less than certain income levels.

» Look at overall changes to the property tax system.

"It's the right time to look at some big-picture policy," Apo said.

Mayor Mufi Hannemann will forward a budget and is expected to offer tax proposals of his own.

The mayor said he wants the Council to again consider creating a homeowner classification to give owner-occupants the biggest break through the lowest tax rate. The Council rejected the idea last year.

Hannemann will also propose giving a one-time $150 tax credit to low-income renters as a way to respond to previous concerns by councilmembers that a homeowner category would hurt renters.

The mayor has already said he would also like to put more money in the city's rainy-day fund and has also decided to set aside enough money for 4 percent pay raises for collective-bargaining contracts. A budget surplus, the amount so far not disclosed, is one way some of these initiatives will be paid for.

"That's taxpayers' money. I don't think we should be treating (the surplus) like manna from heaven," Marshall said. "The whole idea is that we should reduce the tax rate so that we maintain only what we have to."

The mayor is likely to talk about taxes when he gives his State of the City address today and when he releases his budget by next Thursday.

Earlier this month, a three-member arbitration panel awarded Hawaii's 1,800 state and county firefighters across-the-board pay raises of 5 percent each year over the next four years beginning July 1.

The potential ramifications of that award worry some on the Council.

"I have mixed emotions. I believe all of our public service employees deserve the most that we can give them," Marshall said. "Can we give all of them 20 percent raises over the next four years? I doubt it."

The budget would also have to set aside 1 percent of property tax revenues to two new funds -- one-half percent for affordable-housing programs and another one-half percent for land conservation initiatives. The new funds were approved by voters in the fall and would mean that about $5 million could not be used for other purposes.

Currently, the exemption is $80,000, but Djou is proposing the exemption be increased to $120,000.

"The exact dollar amount will be identical for a $400,000 or a $2 million house, but as a percentage of your home (value), it means a lot more for the $400,000 house," Djou said. "I think it goes a longer way with helping those who really need assistance."